Braced for the Huge Consumer Demand Leading Up to the Festive Period Its an Expensive Time of the Year
Christmas is Just Around The Corner
the high street is already braced for the huge consumer demand leading up to the festive period. It’s an expensive time of the year for the consumer, but looking for the right kind of borrowing, at the right price, can help to ease the pain of the dreaded New Year bills when they land at the end of January. Here we look at the most cost effective ways of managing your borrowing for the Christmas period, which should help to avoid any nasty surprises when the festivities are over.
1) Credit Card Balance Transfers
Many of the major credit card providers offer an interest free period when you switch your balance to one of their credit cards. Providers like Barclaycard, Halifax and Virgin Money currently have offers which freeze the interest on your balance transfer for 37 months, giving you 3 years to pay off the balance without costing you a penny in interest. It is important to pay off the balance within that period before the interest kicks in, and also take note of the fee for transferring the balance from another card. This is generally around 3% of the balance, but many providers offer a refund of a portion of this after a couple of months have passed. This is the cheapest way to borrow, so it’s worth hunting around for the best deals before you make a decision. Plan ahead, and make sure you have the account in place ready to transfer your balances in January.
2) 0% Purchase Credit Cards
Very similar to the above option, 0% Purchase Credit Cards will not charge you interest on purchases for a set period of time. There are lots of deals around for these cards leading up to Christmas. Lloyds, Bank of Scotland & MBNA are all offering deals which apply no interest to your purchases for upwards of 20 months. Like the balance transfers, it is important to budget effectively, and have a plan to pay off the balances before the interest kicks in at the end of the deal period. Again, shop around to find the deal which suits you best. Websites like MoneySupermarket, and USwitch can be a great resource in sourcing the best deals currently out there.
3) Personal Loan
Not everybody will qualify for 0% credit cards, but that’s not to say you can’t get access to cost effective borrowing, within your budget, as long as take the time to plan your festive spend. Personal loans can be a good option for people looking for a fixed payment amount, over an agreed period of time at a static interest rate. Having the same payment amount each month allows for effective budgeting. Take the time to ensure you can comfortably afford the repayments not just now, but for the whole term of the loan. The interest rate will vary depending on your current credit status, and while this is an important factor to consider, the monthly payment must fit in to your budget. There are deals available from 3.4% (Sainsbury’s Bank), up to around 48.5% (Avant Credit) depending on your current score. Again, Money Supermarket and USwitch will provide you headline details on all current available deals. Take the time to see what is available to you to ensure you make the right decision for you.
Overdrafts can come in very handy over the festive period, but beware, they are not always the cheapest way to borrow. Speak to your bank to see what they can offer you. Most will charge a % rate on the balance of the overdraft used, but like credit cards and loans, there are offers out there for interest fee limits on arranged overdrafts. For instance, First Direct offer no charge on your overdraft balance for the first £250. Nationwide offer 0% interest on your overdraft balance for the first 12 months of the account being open. If you do decide to use an overdraft for your Christmas spending, try to ensure you use it as a short term option. Preferably a few days at a time to keep costs a low as possible. Also it is massively important not to fall in to an unauthorised overdraft position. The fees and charges associated with this can be very high, and undo all the good budgeting work you have done leading up to Christmas. If you find yourself in this position, speak to your bank. Tell them what has happened and see if there is anything they can do to help.
If the above solutions are not available to you due to your credit status or any other reason, there are a whole range of short term lenders available who can provide finance to you on a fixed term basis. This can become very expensive if not handled correctly. Interest rates can be high, and many people have found themselves in trouble from taking out a loan which was not affordable for them to pay back in such a short length of time. Do your research. Ask yourself the question “Can I realistically pay this back on the date set?” Christmas is a time for celebration and over indulgence, but the seasonal excess it is not worth putting yourself in to financial hardship. It’s also important to only take a short term loan if you can pay back in full, without the need to borrow again for the following month. It’s an easy cycle to get caught up in, but as long as you are clear in your own mind of the risks, and know you have the ability to comfortably repay the loan, short term loans can be a viable option for your festive spending needs.